Hong Kong housing analysts are predicting a market bottom this year

HONG Kong’s residential property market is set to finally turn a corner after a three-year slump as lower interest rates draw more buyers, according to analysts. Just do not expect prices to grow much.

Cheaper borrowing costs, an influx of mainland Chinese talent and robust rents will help to stabilise the market. Home prices – which have fallen to an eight-year low amid rate hikes and a population outflow – are expected to bottom out this year, although they are unlikely to increase significantly due to a lingering supply glut.

“The property market is going to be better in 2025” as measured by both the value and volume of transactions, said Patrick Wong, an analyst with Bloomberg Intelligence (BI). Home prices could gradually rebound as lower mortgage rates help to unleash pent-up demand, BI estimates.

A potential positive carry – rental yield exceeding borrowing costs – will also entice investors to purchase homes, according to Jeff Yau, a property analyst at DBS. As leasing demand from mainland immigrants increases, rental yield is expected to catch up with the mortgage rate in the coming months, Yau said.

Rental yield stood at 3.46 per cent in October, the second-highest level in almost 13 years, according to Centaline Property Agency.

Meanwhile, the mortgage rate has fallen to 3.5 per cent, data from mReferral Mortgage Brokerage Services show.

The residential market began to show some signs of a recovery last year following a series of policies to scrap extra taxes and loosen mortgage rules, on top of the onset of the rate-reduction cycle.

The number of home transactions hit a three-year high in 2024 as sentiment improved, according to Centaline.

Nonetheless, an oversupply of homes is likely to suppress meaningful price growth. While primary home sales will gain by about 10 per cent in 2025 to 20,000 units, supply will be more than double that, said Hannah Jeong, Hong Kong head of valuation & advisory services at CBRE Group. “Even if take-up increases, it will not resolve the unsold units problem,” said Jeong, adding that some developers still have to offer discounts.

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In the first project launched in the new year, a developer cut the price for some apartments to the lowest on Hong Kong Island since 2013, according to Midland Realty. The latest homes put up for sale at the Oria project were priced at about 30 per cent lower than the previous batch in mid-2023, Centaline said.

Jeong expects home prices to be little changed in 2025, as does DBS’ Yau. BI is more optimistic, predicting gains of 5 to 10 per cent.

Secondary sellers continue to struggle. Hong Kong’s used home prices are now close to the lowest level in eight years after declining almost 30 per cent since the peak in 2021.

In addition to lower interest rates, market participants are counting on favourable policies from the government in its Budget next month to boost price growth. “When mortgage repayment becomes more affordable, the market will benefit,” said BI’s Wong. BLOOMBERG